RFS under Attack Once Again

By Michael McAdams | May 06, 2013

Congress is back, and so are the same old shenanigans. Yes, it’s April, and it’s time for some to blame the renewable fuel standard (RFS) for the price of gasoline, and everything wrong with the world. Maybe not the entire world, but it sure seems like it if you believe some of the rhetoric I’ve been hearing lately.

But here’s what’s different this time: for the first occasion in a decade, the price of gasoline is actually falling in the spring, rather than rising.

Now don’t let the facts get in the way of a good public relations campaign, which may be why the anti-RFS forces have ramped up their attacks. They’ve managed to get Congressman Bob Goodlatte, R-Va., to introduce legislation to repeal the RFS, legislation that the Advanced Biofuels Association and its members will adamantly oppose. Nevertheless, as I write this column, the American Petroleum Institute and the American Fuel and Petrochemical Manufactures Association are flying in CEOs of oil and refining companies to call for repeal of the RFS. Few think they can ultimately repeal the RFS, but they may succeed in getting Congress to open it up for review. And if that happens, there’s no telling what Congress will do.

Last week, the House Energy and Commerce Committee—being spurred by rising ethanol RIN prices and refining industry complaints that it had "hit the blend wall"—asked various interested organizations to comment on the committee’s white paper, which included 11 questions. Most of the questions focused on the current concerns over the percentage of ethanol blends such as E-15, and the “blend wall” (the blend wall is the current blending limit of 10 percent ethanol into the gasoline pool). This year, the U.S. Energy Information Agency predicts the gasoline pool to decrease to approximately 133.4 billion gallons, while the RFS calls for the use of up to 13.8 billion gallons of corn ethanol.

In the Senate, Chairman Ron Wyden, D-Ore., of the Senate Committee on Energy and Natural Resources, sent a three-page memo asking for the U.S. EPA to give a full brief on the causes of the rise in the ethanol RIN market and its potential impact on gasoline prices. Additionally, he is asking detailed questions about the market participants, and how the trades are structured and taking place.

So what do we expect in the coming months? The House Energy and Commerce Committee will broaden its analysis and ask for input on a minimum of three more white papers, and then hold hearings. Meanwhile, the Senate Energy Committee may hold a gasoline price hearing “at some point," but no dates have been scheduled.

There are two other issues worth noting. First, EPA has a number of rules it is required to complete in the next few months. These include establishing the mandated numbers for each of the pools under the RFS, as well as another set of rules regulating the RIN pool and creating a quality assurance program for the gallons under the RFS. EPA will tackle other rules, like heating oil definition changes, commingling, pathway approval for technologies, and feedstocks.

Also, the current budget debate has driven new interest in the tax code, and the House Ways and Means Committee is asking for comments on the current biofuels tax provisions. ABFA and most of the major trade organizations have submitted comments, although it is too early to know whether there will be new tax provisions. In fact, some argue that Congress should “go big” and propose an entirely new framework for renewable energy. This would be far more difficult, but stranger things have happened in my career.

With so much going on, it’s important to stay engaged and follow events closely, as there are multiple pieces in flux that could positively or negatively affect the advanced biofuels industry. Your input matters, so please submit your own comments to the white papers and during the rulemaking comment periods. As always, ABFA will be engaged.

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